Consumer prices in Japan increased by 2.9% excluding fresh products in October year-on-year, according to official data released Friday, compared to 2.8% in September, marking the first acceleration in inflation since June in the archipelago.
Higher inflation in October had been anticipated by economists due to the reduction in public aid aimed at limiting the rise in electricity and gas prices.
The consensus of economists from the Bloomberg agency had thus predicted inflation of 3% excluding fresh products.
But these new data do not go in the direction hoped for by the Bank of Japan (BoJ), still currently reluctant to tighten its ultra-accommodating monetary policy, even if it has occasionally made adjustments since the end of 2022 to gain flexibility.
At the end of October, the BoJ raised its inflation forecast to 2.8% (compared to 2.5% previously) for the 2023/24 financial year which will end at the end of next March.
Above all, it then also sharply raised its inflation outlook for 2024/25, to 2.8% compared to only 1.9% previously.
The BoJ aims to generate stable inflation of around 2% excluding fresh products in Japan.
Although this level has been largely exceeded since the spring of 2022, the BoJ continues to believe that inflation in Japan should not last in the long term, due to a lack of sufficiently robust wage increases and economic growth to sustain it healthily. .
Complicated picture for the BoJ
We expect inflation to decline from now on (in Japan, Editor’s note) but the pace of deceleration will be slow, as past increases in producer prices will be passed on to consumers, commodity markets remain nervous and the The yen remains weak, which increases Japanese imports, Stefan Angrick responded on Friday in a note from Moody’s Analytics.
In October, beyond the effect of a slight increase in world energy prices combined with the reduction in subsidies from the Japanese government on this front, prices in leisure activities accelerated against a backdrop of the strong return of foreign tourists to the country. archipelago, and food inflation has remained stubbornly high, Angrick said.
All this complicates the picture for the BoJ, which wants to see evidence of demand-driven inflation while price rises remain largely supply-driven and erode household purchasing power, according to this economist.
Due to the slowdown in the economic recovery in Japan, whose GDP contracted in the third quarter (-0.5% compared to the previous three months according to a first estimate published in mid-November), the BoJ should maintain a certain level of support, while taking mini-monetary tightening measures to prevent a free fall in the yen, Mr. Angrick predicted.
A virtuous cycle of prices will not occur until wages rise further, and the BOJ is not yet in a situation where it can easily normalize its monetary policy, Takeshi Minami of the research institute also agreed. Norinchukin, quoted by the Bloomberg agency.